Best Buy to Sell Online Music Provider Napster

According to the Star Tribune, industry observers estimate that Napster now has 400,000 subscribers-significantly fewer than the 706,000 that it had when Best Buy acquired it three years ago-and Napster hasn't been able to overtake Apple's iTunes.

After paying $121 million to acquire Napster in 2008, Best Buy Company, Inc. is selling the online music provider.

The buyer is online music company Rhapsody. Terms of the deal weren't disclosed, but Richfield-based Best Buy said that it will retain a minority stake in Rhapsody. The sale is expected to close sometime around November 30.

Rhapsody is a digital music service that gives subscribers unlimited access to more than 13 million songs that can be accessed on a PC or laptop, via an Internet-connected home stereo or TV, on an MP3 player, or on a mobile phone.

Meanwhile, Napster-which provides access to 15 million songs-was extremely popular among computer users after its founding in 1999 because it offered free downloads of copyrighted music. But after facing challenges in court, the business model morphed into a paid subscription base.

According to the Star Tribune, Best Buy bought Napster when digital music downloads were on the rise and sales of music CDs were on the decline-but Napster hasn't been able to overtake Apple's iTunes.

Best Buy isn't sharing the number of subscribers that Napster now has. But industry observers estimate that the figure is less than 400,000-significantly fewer than the 706,000 subscribers that it had three years ago, the Minneapolis newspaper reported. Rhapsody reportedly said in July that it had more than 800,000 streaming-music subscribers.

“Rhapsody has demonstrated that it has what it takes to build a profitable business in the increasingly competitive on-demand music market,” Chris Homeister, senior vice president and general manager of entertainment for Best Buy, said in a statement. “We are confident they are the right partner to provide Napster's existing subscriber base with an immersive digital music experience moving forward.”

A Best Buy spokeswoman told the Star Tribune that following the sale, Best Buy will focus on selling music devices but doesn't plan to have its own online music service.

Citing industry analysts, the Star Tribune reported that Rhapsody is in danger of being overshadowed by newer online music services like Spotify, MOG, and Rdio.

To read more about the sale of Napster in the Star Tribune, click here.